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THE GAZETTE OF INDIA
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THE GAZETTE OF INDIA EXTRAORDINARY S.O. 850(E) In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) the Securities and Exchange Board of India hereby, makes the following regulations.
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THE GAZETTE OF INDIA
EXTRAORDINARY
PART II- SECTION 3-SUB-SECTION (ii)
PUBLISHED BY AUTHORITY
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
MUMBAI, DECEMBER 4, 1996
SECURITIES AND EXCHANGE BOARD OF INDIA
(VENTURE CAPITAL FUNDS) REGULATIONS, 1996
(including amendments made upto December 30, 2000)
S.O. 850(E) In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) the Securities and Exchange Board of India hereby, makes the following regulations.
CHAPTER I
PRELIMINARY
(1) These regulations may be called the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996.
(2) They shall come into force on the date of their publication in the Official Gazette.
In these regulations, unless the context otherwise requires, -
[(aa) "associate
company" means a company in which a
director or trustee or sponsor or settlor of the venture capital fund or asset
management company holds either individually or collectively, equity shares in
excess of 15% of its paid-up equity share capital of venture capital
undertaking".]1
[(ee) `equity linked
instruments’ includes instruments
convertible into equity shares or share warrants, preference shares, debentures
compulsorily convertible into equity.]2
[(h) `inspecting or investigating officer’ means an inspecting or investigation officer appointed by the Board under regulation 25. ]4
[(hh) ‘investible funds’ means corpus of the fund net of expenditure for administration and management of the fund.]5
[(j) `negative list’ means a list of items specified in Third Schedule]6.
8 [(l) ‘unit’ means beneficial interest of the investors in the scheme or fund floated by trust or shares9 issued by a company including a body corporate.]
[(m) ‘venture capital fund’ means a fund established in the form of a trust or a company including a body corporate and registered under these regulations which-
[(n) `venture capital undertaking’ means a domestic company –
1 Substituted for "associate person" by
SEBI (Venture Capital Funds) (Second Amendment) Regulations, 2000 published in
the Gazette of India dated December 30, 2000, vide S.O. No. 1179 (E). Prior to
substitution, the definition of ‘associate’ in relation to venture capital fund
means a person, –
2 Inserted by SEBI (Venture
Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India
dated September 15, 2000, vide S.O. No. 831(E) .
3Omitted by SEBI (Venture Capital Funds)
(Amendment) Regulations, 2000 published in the Gazette of India dated September
15, 2000, vide S.O. No. 831(E). Prior to omission it read as, "(g) "Government
of India Guidelines" means the guidelines dated September 20, 1995
issued by the Government of India for Overseas Venture Capital Investments in
India as amended from time to time;"
4Substituted by SEBI (Venture Capital Funds)
(Amendment) Regulations, 2000 published in the Gazette of India dated September
15, 2000, vide S.O. No. 831(E). Prior to substitution is read as, "
"(h) "inspecting officer" means an inspecting officer
appointed by the Board under regulation 25 ;"
5Inserted by SEBI (Venture Capital Funds)
(Amendment) Regulations, 2000 published in the Gazette of India dated September
15, 2000, vide S.O. No. 831(E)
6Substituted by SEBI (Venture Capital Funds)
(Amendment) Regulations, 2000 published in the Gazette of India dated September
15, 2000, vide S.O. No. 831(E). Prior to substitution is read as "(j)
"sick industrial company" has the same meaning as is assigned
to it in clause (o) of sub-section (1) of section (3) of the Sick Industrial
Companies (Special Provisions) Act, 1985 (1 of 1986);"
7Inserted by the Securities and Exchange Board of
India (Venture Capital Funds) Amendment Regulations, 1999 dated November 17th,
1999 by S.O. 1118 (E).
8Substituted by SEBI (Venture Capital Funds)
(Amendment) Regulations, 2000 published in the Gazette of India dated September
15, 2000, vide S.O. No. 831(E) . Prior to substitution is read as ""units"
means the interest of the investors in a scheme of a venture capital fund set
up as a trust, which consist of each unit representing one undivided share in
the assets of the scheme".
9Substituted for the words "any other
securities" by SEBI (Venture Capital Funds) (Second Amendment)
Regulations, 2000 published in the Gazette of India dated December 30, 2000,
vide S.O. No. 1179 (E).
10Substituted by SEBI (Venture Capital Funds)
(Amendment) Regulations, 2000 published in the Gazette of India dated September
15, 2000, vide S.O. No.831 (E). Prior to substitution is read as, "(m)
"venture capital fund" means a fund established in the form of
a company or trust which raises monies through loans, donations, issue of
securities or units as the case may be, and makes or proposes to make
investments in accordance with these regulations."
11Inserted by SEBI (Venture Capital Funds)
(Amendment) Regulations, 2000 published in the Gazette of India dated September
15, 2000, vide S.O. No. 831(E) .
CHAPTER II
REGISTRATION OF VENTURE CAPITAL FUNDS
(2) Any company or trust [or a body corporate]13, who on the date of commencement of these regulations is carrying any activity as a venture capital fund without a certificate shall make an application to the Board for grant of a certificate within a period of three months from the date of such commencement:
Provided that the Board, in special cases, may extend the said period upto a maximum of six months from the date of such commencement.
(3) An application for grant of certificate under sub-regulation (1) or sub-regulation (2) shall be made to the Board in Form A and shall be accompanied by a non-refundable application fee as specified in Part A of the Second Schedule to be paid in the manner specified in Part B thereof.
(4) Any company or trust [or a body corporate]14 referred to in sub-regulation (2) who fails to make an application for grant of a certificate within the period specified therein shall cease to carry on any activity as a venture capital fund.
(5) The Board may in the interest of the investors issue directions with regard to the transfer of records, documents or securities or disposal of investments relating to its activities as a venture capital fund.
(6) The Board may in order to protect the interests of investors appoint any person to take charge of records, documents, securities and for this purpose also determine the terms and conditions of such an appointment.
For the purpose of the grant of a certificate by the Board the applicant shall have to fulfil in particular the following conditions, namely:-
(a) if the application is made by a company, -
(i) memorandum of association has as its main objective, the carrying on of the activity of a venture capital fund;
(ii) it is prohibited by its memorandum and articles of association from making an invitation to the public to subscribe to its securities;
(iii)its director or principal officer or employee is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant;
(iv) its director, principal officer or employee has not at any time been convicted of any offence involving moral turpitude or any economic offence.
(v) it is a fit
and proper person15.
(b) if the application is made by a trust, -
(i) the instrument of trust is in the form of a deed and has been duly registered under the provisions of the Indian Registration Act, 1908 (16 of 1908);
(ii) the main object of the trust is to carry on the activity of a venture capital fund;
(iii) the directors of its trustee company, if any, or any trustee is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant;
(iv) the directors of its trustee company, if any, or a trustee has not at any time, been convicted of any offence involving moral turpitude or of any economic offence;
(v) the applicant is a fit and
proper person.16
[(c) if the application is made by a body corporate
(i ) it is set up or established
under the laws of the Central or State Legislature.
(ii) the applicant is permitted to carry on the activities of a venture capital fund.
(iii) the applicant is a fit and proper person.
(iv) the directors or the trustees, as the case may be, of such body corporate have not been convicted of any offence involving moral turpitude or of any economic offence.
(v) the directors or the trustees, as the case may be, of such body corporate, if any, is not involved in any litigation connected with the securities market which may have an adverse bearing on thebusiness of the applicant.]17
(d) [the applicant]18 has not been refused a certificate by the Board or its certificate has [not]19 been suspended under regulation 30 or cancelled under regulation 31. 20
The Board may require the applicant to furnish such further information as it may consider necessary.
An application which is not complete in
all respects shall be rejected by the Board:
Provided
that, before rejecting any such application, the applicant shall be given an
opportunity to remove, within thirty days of the date of receipt of
communication, the objections indicated by the Board.
Provided further that the Board may, on being satisfied that
it is necessary to extend the period specified in the first proviso, extend such
period by such further time not exceeding ninety days.
(1) If the
Board is satisfied that the applicant is eligible for the grant of certificate,
it shall send an intimation to the applicant.
(2) On
receipt of intimation, the applicant shall pay to the Board, the registration
fee specified in Part A of the Second Schedule in the manner specified in Part B
thereof.
(3) The Board shall on receipt of the
registration fee grant a certificate of registration in Form B.
The certificate granted under
regulation 7 shall be inter-alia, subject to the following conditions,
namely:-
(a) the venture capital fund shall abide by the provisions
of the Act, [***]21 and these regulations;
(b) the venture capital fund shall
not carry on any other activity other than that of a venture capital
fund;
(c) the venture capital fund shall forthwith inform the
Board in writing if any information or particulars previously submitted to the
Board are found to be false or misleading in any material particular or if there
is any change in the information already submitted.
(1) After considering an
application made under regulation 3, if the Board is of the opinion that a
certificate should not be granted, it may reject the application after giving
the applicant a reasonable opportunity of being heard.
(2) The
decision of the Board to reject the application shall be communicated to the
applicant within thirty days.
(1) Any applicant whose application
has been rejected under regulation 9 shall not carry on any activity as a
venture capital fund.
(2) Any company or trust [or a body
corporate]22 referred to in sub-regulation (2) of regulation 3, whose
application for grant of certificate has been rejected under regulation 9 by the
Board shall, on and from the date of the receipt of the communication under
sub-regulation (2) of regulation 9, cease to carry on any activity as a venture
capital fund.
(3) The Board may in the interest of the investors issue
directions with regard to the transfer of records, documents or securities or
disposal of investments relating to its activities as a venture capital
fund.
(4) The Board may in order to protect the interests of the
investors appoint any person to take charge of records, documents, securities
and for this purpose also determine the terms and conditions of such an
appointment.
12 Inserted by SEBI (Venture
Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India
dated September 15, 2000, vide S.O. No.831. (E).
13
Inserted by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000 published
in the Gazette of India dated September 15, 2000, vide S.O. No.831. (E).
14
Inserted by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000 published
in the Gazette of India dated September 15, 2000, vide S.O. No.831. (E).
15
Inserted by SEBI (Venture Capital Funds) (Amendment) Regulations, 1998 notified
on January 5, 1998 by S.O. 19(E).
16
Ibid
17 Inserted by the Securities and Exchange Board of India
(Venture Capital Funds) (Amendment) Regulations, 1999 dated November 17th, 1999 by S.O. 1118 (E).
18
Substituted for the words "a company or trust" by SEBI (Venture Capital Funds)
(Amendment) Regulations, 2000 published in the Gazette of India dated September
15, 2000, vide S.O. No.831. (E).
19 Inserted by SEBI (Venture
Capital Funds) (Second Amendment) Regulations, 2000 published in the Gazette of
India dated December 30, 2000, vide S.O. No. 1179 (E).
20
Earlier clause (c) renumbered as clause (d) by the Securities and Exchange Board
of India (Venture Capital Funds) (Amendment) Regulations, 1999 dated November
17th, 1999 by S.O. 1118 (E).
21 The words "the Government of
India Guidelines" omitted by SEBI (Venture Capital Funds) (Amendment)
Regulations, 2000 published in the Gazette of India dated September 15, 2000,
vide S.O. No. 831(E).
22 Inserted by SEBI (Venture Capital Funds) (Amendment)
Regulations, 2000 published in the Gazette of India dated September 15, 2000,
vide S.O. No.831. (E).
CHAPTER III
INVESTMENT CONDITIONS AND RESTRICTIONS
(1) A venture capital fund may raise monies from any
investor whether Indian, foreign or non-resident Indian[ by way of issue of
units]23.
(2) No venture capital fund set up as a company or any
scheme of a venture capital fund set up as a trust shall accept any investment
from any investor which is less than five lakh rupees:
Provided
that nothing contained in sub-regulation (2) shall apply to investors who
are,-
(a) employees or the principal officer or directors of the
venture capital fund, or directors of the trustee company or trustees where the
venture capital fund has been established as a trust; or
[(b) the
employees of the fund manager or asset management company.]24
[(3) Each scheme launched or fund set up by a venture capital fund shall have firm commitment from the investors for contribution of an amount of atleast Rupees five crores before the start of operations by the venture capital fund.]26
12. 27[Investment conditions and restrictions
All investment made or to be made by a venture capital fund shall be subject to the following conditions, namely:-
[No venture capital fund shall be entitled to get its units listed on any recognised stock exchange till the expiry of three years from the date of the issuance of units by the venture capital fund.]29
23Inserted by SEBI (Venture Capital
Funds) (Amendment) Regulations, 2000 published in the Gazette of India dated
September 15, 2000, vide S.O. No.831. (E).
24 Substituted for the words " non
resident Indians" by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000
published in the Gazette of India dated September 15, 2000, vide S.O. No. 831(E)
.
25 Omitted by SEBI (Venture Capital Funds) (Amendment)
Regulations, 2000 published in the Gazette of India dated September 15, 2000,
vide S.O. No. 831(E). Prior to omission it read as "persons or institutions of
foreign origin."
26 Inserted by SEBI (Venture Capital Funds) (Amendment)
Regulations, 2000 published in the Gazette of India dated September 15, 2000,
vide S.O. No. 831(E).
27 Substituted by SEBI (Venture
Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India
dated September 15, 2000, vide S.O. No. 831(E). Prior to substitution it read as
"All investments made or to be made by a venture capital fund shall be subject
to the following restrictions:
(a)
the venture capital fund shall not invest in the equity shares of any company or
institution providing financial services;
(b) at least 80 percent of funds
raised by a venture capital fund shall be invested in:-
(i)the equity shares or equity related securities issued by a company whose securities are not listed on any recognised stock exchange:
Provided that a venture capital fund may invest in equity shares or equity related securities of a company whose securities are to be listed or are listed where the venture capital fund has made these investments through private placements prior to the listing of the securities.
(ii) the equity shares or equity related securities of a financially weak company or a sick industrial company, whose securities may or may not be listed on any recognised stock-exchange. Explanation: For the purposes of this regulation, a "financially weak company" means a company, which has at the end of the previous financial year accumulated losses, which has resulted in erosion of more than 50% but less than 100% of its networth as at the beginning of the previous financial year.
(iii) providing financial assistance in any other manner to companies in whose equity shares the venture capital fund has invested under sub-clause (i) or sub-clause (ii),as the case may be. Explanation: For the purposes of this regulation, "funds raised" means the actual monies raised from investors for subscribing to the securities of the venture capital fund and includes monies raised from the author of the trust in case the venture capital fund has been established as a trust but shall not include the paid up capital of the trustee company, if any".
28
Omitted by SEBI (Venture Capital Funds) (Second Amendment) Regulations, 2000
published in the Gazette of India dated December 30, 2000, vide S.O. No. 1179
(E). Prior to omission it read as, "Provided that if the venture capital fund
seeks to avail of benefits under the relevant provisions of the Income Tax Act
applicable to a venture capital fund, it shall be required to disinvest from
such investments within a period of one year from the date on which the shares
of the venture capital undertaking are listed in a recognised Stock
Exchange."
29Substituted by SEBI (Venture Capital Funds) (Second
Amendment) Regulations, 2000 published in the Gazette of India dated December
30, 2000, vide S.O. No. 1179 (E). Prior to substitution it read as, "No venture
capital fund shall be entitled to get its securities or units, as the case may
be, listed on any recognised stock exchange till the expiry of three years from
the date of the issuance of securities or units, as the case may be, by the
venture capital fund."
CHAPTER IV
GENERAL OBLIGATIONS AND RESPONSIBILITIES
No venture capital fund shall issue any document or advertisement inviting offers from the public for the subscription or purchase of any of its [***]30 units.
A venture capital fund may receive monies for investment in the venture capital fund [only]31 through private placement of its [***]32 units.
16. [Placement memorandum or subscription agreement
16(1) The venture capital fund shall –
(2) The Venture Capital Fund shall file with the Board for information, the copy of the placement memorandum or the copy of the contribution or subscription agreement entered with the investors along with a report of money actually collected from the investor.] 33
(1) The placement memorandum [or the
subscription agreement with investors]34 referred to in sub-regulation (1) of
regulation 16 shall contain the following, namely:-
(a)
details of the trustees or trustee company [and the directors or chief
executives]35 of the venture capital fund;
[(b) (i) the proposed corpus of
the fund and the minimum amount to be raised for the fund to be operational.
(ii) the minimum amount to be raised for each scheme and the provision for refund of monies to investor in the event of non receipt of minimum amount].36
[(c) details of entitlements on the [***]37 units of venture capital fund for which subscription is being sought.]38
(d) tax implications that are likely to apply to
investors;
(e) manner of
subscription to the units [***]39 of the venture
capital fund]40;
(f) the period
of maturity, if any, of the [fund]41;
(g) the manner,
if any, in which the [fund shall]42 be wound up;
(h) manner in which the benefits accruing to investors in
the units of the trust are to be distributed;
[(i) details of the fund manager or asset management
company if any, and the fees to be paid to such manager.]43
[(j) The details about performance of the fund, if any, managed by the Fund Manager
(k) investment strategy of the fund.
(l) any other information specified by the Board.]44
(2) [***]45
18. [***]46
19. [***]47
(1) Every
venture capital fund shall maintain for a period of [eight]48 years books
of accounts, records and documents which shall give a true and fair picture of
the state of affairs of the venture capital fund.
(2) Every venture capital fund
shall intimate the Board, in writing, the place where the books, records and
documents referred to in sub-regulation (1) are being maintained.
(1) The Board may at any time call for
any information from a venture capital fund with respect to any matter relating
to its activity as a venture capital fund.
(2) Where
any information is called for under sub-regulation (1) it shall be furnished
[within the time specified by the Board]49.
(1) A scheme of a venture capital fund
set up as a trust shall be wound up,
(a) when the
period of the scheme, if any, mentioned in the placement memorandum is over;
(b) if it is the opinion of the trustees or the trustee
company, as the case may be, that the scheme shall be wound up in the interests
of investors in the units;
(c) if seventy five percent
of the investors in the scheme pass a resolution at a meeting of unit holders
that the scheme be wound up; or
(d) if the Board so
directs in the interests of investors.
(2) A venture capital fund set up as a company shall be wound up in accordance with the provisions of the Companies Act, 1956 (1 of 1956).
[(2A) A venture capital fund set up as a body corporate shall be wound up in accordance with the provisions of the statute under which it is constituted.]50
[(3) The trustees or trustee company of the venture capital fund set up as a trust or the Board of Directors in the case of the venture capital fund is set up as a company (including body corporate) shall intimate the Board and investors of the circumstances leading to the winding up of the Fund or Scheme under sub-regulation (1).]51
(1) On and from the date of intimation under sub-regulation (3) of regulation 23, no further investments shall be made on behalf of the scheme so wound up.
(2) Within three months from the date of intimation under sub-regulation (3) of regulation 23, the assets of the scheme shall be liquidated, and the proceeds accruing to investors in the scheme distributed to them after satisfying all liabilities.
30 Omitted the words "securities or"
by SEBI (Venture Capital Funds) (Second Amendment) Regulations, 2000 published
in the Gazette of India dated December 30, 2000, vide S.O. No. 1179 (E).
31
Inserted by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000 published
in the Gazette of India dated September 15, 2000, vide S.O. No.831 (E).
32
Omitted the words "securities or" by SEBI (Venture Capital Funds) (Second
Amendment) Regulations, 2000 published in the Gazette of India dated December
30, 2000, vide S.O. No. 1179 (E).
33 Substituted by SEBI (Venture
Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India
dated September 15, 2000, vide S.O. No. 831(E). Prior to substitution it read
as, "(2) A venture capital fund established as a company shall, before making an
offer inviting any subscription to its securities, file with the Board a
placement memorandum which shall give details of the terms subject to which
monies are proposed to be raised from the investors."
34
Inserted by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000 published
in the Gazette of India dated September 15, 2000, vide S.O. No. 831(E).
35
Inserted by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000 published
in the Gazette of India dated September 15, 2000, vide S.O. No. 831(E).
36
Substituted "details of investments that are proposed to be made" by SEBI
(Venture Capital Funds) (Amendment) Regulations, 2000 published in the Gazette
of India dated September 15, 2000, vide S.O. No. 831(E).
37
Deleted the earlier words "securities including" by SEBI (Venture Capital Funds)
(Amendment) Regulations, 2000 published in the Gazette of India dated December
30, 2000, vide S.O. No. 1179 (E).
38 Substituted by SEBI (Venture
Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India
dated September 15, 2000, vide S.O. No. 831(E). Prior to substitution it read
as, "details of investments that are proposed to be made."
39
Omitted the words "or securities" by SEBI (Venture Capital Funds) (Amendment)
Regulations, 2000 published in the Gazette of India dated December 30, 2000,
vide S.O. No. 1179 (E).
40 Substituted for the words "of
the trust" by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000
published in the Gazette of India dated September 15, 2000, vide S.O. No.
831(E).
41 Substituted for the word "scheme" by SEBI (Venture
Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India
dated September 15, 2000, vide S.O. No. 831(E) .
42
Substituted for the words "scheme is" by SEBI (Venture Capital Funds)
(Amendment) Regulations, 2000 published in the Gazette of India dated September
15, 2000, vide S.O. No. 831(E).
43 Substituted by SEBI (Venture
Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India
dated September 15, 2000, vide S.O. No. 831(E). Prior to substitution it read
as, "details of the asset management company, if any, and of fees to be paid to
such a company."
44 Inserted by SEBI
(Venture Capital Funds) (Amendment) Regulations, 2000 published in the Gazette
of India dated September 15, 2000, vide S.O. No. 831(E).
45 Sub
regulation (2) omitted by SEBI (Venture Capital Funds) (Amendment) Regulations,
2000 published in the Gazette of India dated September 15, 2000, vide S.O. No.
831(E). Prior to omission it read as, "(2) The placement memorandum referred to
in sub-regulation (2) of regulation 16 shall contain the following,
namely:-
(a)
details of the securities that are being offered;
(b)
details of investments that are proposed to be made;
(c)
details of directors of the company;
(d) tax implications that are
likely to apply to investors;
(e) manner of subscription to the
securities that are to be issued;
(f) manner in which the benefits
accruing to investors in the securities are to be distributed; and
(g)
details of the asset management company, if any, and of fees to be paid to such
a company"
46 Omitted by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India dated September 15, 2000, by vide S.O. No. 831(E). Prior to omission it read as, "The placement memorandum referred to in regulation 16 may be issued for private circulation only after the expiry of twenty one days of its submission to the Board:
Provided that if, within twenty one days of submission of the placement memorandum, the Board communicates any amendments to the placement memorandum, the venture capital fund shall carry out such amendments in the placement memorandum before such memorandum is circulated to the investors"
47 Omitted by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India dated September 15, 2000, vide S.O. No. 831(E). Prior to omission it read as, "Amendments or changes to any placement memorandum already filed with the Board can be made only if,-
(a)
a copy of the placement memorandum indicating the changes is filed with the
Board; and
(b) within twenty one days of such filing, the Board has
not communicated any objections or observations on the said amendments or
changes"
48
The word "ten" substituted by SEBI (Venture Capital Funds) (Amendment)
Regulations, 2000 published in the Gazette of India dated September 15, 2000,
vide S.O. No. 831(E).
49 Substituted for the words "to
the Board within fifteen days" by SEBI (Venture Capital Funds) (Amendment)
Regulations, 2000 published in the Gazette of India dated September 15, 2000,
vide S.O. No. 831(E).
50 Inserted by SEBI (Venture
Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India
dated September 15, 2000, vide S.O. No. 831(E).
51
Substituted by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000
published in the Gazette of India dated September 15, 2000, vide S.O. No.
831(E). Prior to substitution it read as, "The trustees or trustee company of
the venture capital fund set up as a trust shall intimate the Board and
investors of the circumstances leading to the winding up of the scheme under
sub-regulation (1)."
CHAPTER V
INSPECTION AND INVESTIGATION
(1) The Board may[suo moto or upon receipt of information or complaint]52 appoint one or more persons as inspecting or investigating officer to undertake inspection or investigation of the books of accounts, records and documents relating to a venture capital fund for any of the following reasons, namely:-
(1) Before ordering an inspection or investigation under
regulation 25, the Board shall give not less than ten days notice to the venture
capital fund.
(2) Notwithstanding anything contained in sub-regulation
(1), where the Board is satisfied that in the interest of the investors no such
notice should be given, it may by an order in writing direct that the inspection
or investigation of the affairs of the venture capital fund be taken up without
such notice.
(3) During the course of an inspection or investigation,
the venture capital fund against whom the inspection or investigation is being
carried out shall be bound to discharge its obligations as provided in
regulation 27.
(1) [It shall be the duty of every officer of the Venture Capital Fund in respect of whom an inspection or investigation has been ordered under the regulation 25 and any other associate person who is in possession of relevant information pertaining to conduct and affairs of such Venture Capital Fund including fund manager or asset management company, if any, to produce to the Investigating or Inspecting Officer such books, accounts and other documents in his custody or control and furnish him with such statements and information as the said Officer may require for the purposes of the investigation or inspection.
(2) It shall be the duty of every officer of the Venture Capital Fund and any other associate person who is in possession of relevant information pertaining to conduct and affairs of the Venture Capital Fund to give to the Inspecting or Investigating Officer all such assistance and shall extend all such co-operation as may be required in connection with the inspection or investigations and shall furnish such information sought by the inspecting or investigating officer in connection with the inspection or investigation.
(3) The Investigating or Inspecting Officer shall, for the purposes of inspection or investigation, have power to examine on oath and record the statement of any employees, directors or person responsible for or connected with the activities of venture capital fund or any other associate person having relevant information pertaining to such Venture Capital Fund.
(4) The Inspecting or Investigating Officer shall, for the purposes of inspection or investigation, have power to obtain authenticated copies of documents, books, accounts of Venture Capital Fund, from any person having control or custody of such documents, books or accounts.]53
The inspecting or investigating officer shall, as soon as
possible, on completion of the inspection or investigation submit an inspection
or investigation report to the Board:
Provided that if directed to do so
by the Board, he may submit an interim report.
52Inserted by SEBI (Venture
Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India
dated September 15, 2000, vide S.O. No. 831(E) .
53
Substituted by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000
published in the Gazette of India dated September 15, 2000, vide S.O. No.
831(E). Prior to substitution it read as,
"(1)
It shall be the duty of the venture capital fund whose affairs are being
inspected or investigated, and of every director, officer and employee thereof,
of its asset management company, if any, and of its trustees or directors or the
directors of the trustee company, if any, to produce before the inspecting or
investigating officer such books, securities, accounts, records and other
documents in its custody or control and furnish him with such statements and
information relating to the venture capital fund, as the inspecting or
investigating officer may require, within such reasonable period as the
inspecting officer may specify.
(2) The venture capital fund shall
allow the inspecting or investigating officer to have reasonable access to the
premises occupied by such venture capital fund or by any other person on his
behalf and also extend reasonable facility for examining any books, records,
documents and computer data in the possession of the venture capital fund or
such other person and also provide copies of documents or other materials which,
in the opinion of the inspecting or investigating officer are relevant for the
purposes of the inspection or investigation, as the case may be.
(3) The
inspecting or investigating officer, in the course of inspection or
investigation shall be entitled to examine or to record the statements of any
director, officer or employee of the venture capital fund.
(4) It
shall be the duty of every director, officer or employee, trustee or director of
the trustee company of the venture capital fund to give to the inspecting or
investigating officer all assistance in connection with the inspection or
investigation, which the inspecting or investigating officer may reasonably
require."
54 Inserted by SEBI (Venture Capital Funds) (Amendment)
Regulations, 2000 published in the Gazette of India dated September 15, 2000,
vide S.O. No. 831(E).
CHAPTER VI
PROCEDURE FOR ACTION IN CASE OF DEFAULT
[Without prejudice to issue of directions or measure under
regulation 29,]55 the Board may suspend the
certificate granted to a venture capital fund where the venture capital
fund:
(a) contravenes any of the provisions of the Act or these
regulations;
(b) fails to furnish any information relating to its
activity as a venture capital fund as required by the Board;
(c)
furnishes to the Board information which is false or misleading in any material
particular;
(d) does not submit periodic returns or reports as required
by the Board;
(e) does not co-operate in any enquiry, inspection or
investigation conducted by the Board;
(f) fails to resolve the complaints
of investors or fails to give a satisfactory reply to the Board in this
behalf.
The Board may cancel the certificate granted to a venture capital fund:-
(a) when the venture capital fund is guilty of fraud or has
been convicted of an offence involving moral turpitude;
(b) the venture capital fund has been guilty of repeated
defaults of the nature specified in regulation 30; or
Explanation
: In this regulation, "fraud" has the same meaning as is
assigned to it in section 17 of the Indian Contract Act, 1872. (9 of
1872)
(c) contravenes
any of the provisions of the Act or these regulations.
No order of suspension or cancellation of certificate shall be made by the Board, except after holding an enquiry in accordance with the procedure specified in regulation 33.
(1) For the purpose of holding an enquiry under regulation
32, the Board may appoint one or more enquiry officers.
(2) The
enquiry officer shall issue to the venture capital fund, at its registered
office or its principal place of business, a notice setting out the grounds on
which action is proposed to be taken against it and calling upon it to show
cause against such action within a period of fourteen days from the date of
receipt of the notice.
(3) The venture capital fund may,
within fourteen days from the date of receipt of such notice, furnish to the
enquiry officer a written reply, together with copies of documentary or other
evidence relied on by it or sought by the Board from the venture capital
fund.
(4) The enquiry officer shall give a reasonable opportunity
of hearing to the venture capital fund to enable him to make submissions in
support of its reply made under sub-regulation (3).
(5)
Before the enquiry officer, the venture capital fund may appear through any
person duly authorised by the venture capital fund:
Provided
that no lawyer or advocate shall be permitted to represent the venture capital
fund at the enquiry:
Provided further that where a
lawyer or an advocate has been appointed by the Board as a presenting officer
under sub-regulation (6), it shall be lawful for the venture capital fund to
present its case through a lawyer or advocate.
(6) The
enquiry officer may, if he considers it necessary, ask the Board to appoint a
presenting officer to present its case.
(7) The enquiry officer shall,
after taking into account all relevant facts and submissions made by the venture
capital fund, submit a report to the Board and recommend the penal action, if
any, to be taken against the venture capital fund as also the grounds on which
the proposed action is justified.
(1) On receipt of the report from the enquiry officer, the
Board shall consider the same and may issue to the venture capital fund a
show-cause notice as to why the penal action as proposed by the enquiry officer
[or such appropriate action]56 should not be taken against it.
(2) The
venture capital fund shall, within fourteen days of the date of the receipt of
the show-cause notice, send a reply to the Board.
(3) The
Board, after considering the reply, if any, of the venture capital fund, shall,
as soon as possible pass such order as it deems fit.
(1) On and from the date of the suspension of the
certificate, the venture capital fund shall cease to carry on any activity as a
venture capital fund during the period of suspension, and shall be subject to
such directions of the Board with regard to any records, documents or securities
that may be in its custody or control, relating to its activities as venture
capital fund, as the Board may specify.
(2) On and from the date of
cancellation of the certificate, the venture capital fund shall, with immediate
effect, cease to carry on any activity as a venture capital fund, and shall be
subject to such directions of the Board with regard to the transfer of records,
documents or securities that may be in its custody or control, relating to its
activities as venture capital fund, as the Board may specify.
The order of suspension or cancellation of certificate passed under regulation 35 may be published by the Board in two newspapers.
The Board may initiate action for suspension or cancellation of registration of an intermediary holding a certificate of registration under section 12 of the Act who fails to exercise due diligence in the performance of its functions or fails to comply with its obligations under these regulations.
Provided that no such certificate of registration shall be suspended or cancelled unless the procedure specified in the regulations applicable to such intermediary is complied with.
Any person aggrieved by an order of the Board under these regulations may prefer an appeal to the Securities Appellate Tribunal in accordance with section 15T of the Act.]57
55 Inserted by SEBI (Venture Capital Funds) (Amendment)
Regulations, 2000 published in the Gazette of India dated September 15, 2000,
vide S.O. No. 831(E).
56 Inserted by SEBI (Venture
Capital Funds) (Amendment) Regulations, 2000 published in the Gazette of India
dated September 15, 2000, vide S.O. No. 831(E).
57
Inserted by SEBI (Venture Capital Funds) (Amendment) Regulations, 2000 published
in the Gazette of India dated September 15, 2000, vide S.O. No. 831(E).
FIRST SCHEDULE – FORM
FORM A
SECURITIES AND EXCHANGE BOARD OF INDIA
(VENTURE CAPITAL FUNDS)
REGULATIONS, 1996
(see
regulation 3)
APPLICATION
FOR GRANT OF CERTIFICATE OF REGISTRATION AS VENTURE CAPITAL FUND
SECURITIES AND EXCHANGE BOARD OF
INDIA
MITTAL COURT, `B'
WING, 1st FLOOR
NARIMAN
POINT, MUMBAI 400 021
INDIA
i. This form is meant for use by the company or trust (hereinafter referred to as the applicant) for application for grant of certificate of registration as venture capital fund.
ii. The applicant should complete this form, and submit it, along with all supporting documents to the Board at its head office at Mumbai.
iii. This application form should be filled in accordance with these regulations.
iv. The application shall be considered by the Board provided it is complete in all respects.
v. All answers must be legible.
vi. Information which needs to be supplied in more detail may be given on separate sheets which should be attached to the application form.
vii. The application must be signed and all signatures must be original.
viii. The application must be accompanied by an application fee as specified the Second Schedule to these regulations.
1. Name, address of the registered office, address for correspondence, telephone number(s), fax number(s), telex number(s) of the applicant and the name of the contact person.
2. Please indicate to which of the following categories the applicant belongs.
(i) a company established under the Companies Act, 1956 (1
of 1956)
(ii) a trust set
up under the Indian Trusts Act, 1882 (2 of 1882)
3. Date and place of incorporation or establishment and date of commencement of business (enclose certificate of incorporation, memorandum and articles of association or trust deed in terms of which incorporated or established).
4. (a) Details of members of the Board of Trustees or directors of the trustee company, as the case may be, in case the applicant has been set up as a trust.
(b) Details of members of the Board
of Directors of the venture capital fund in case the applicant has been set up
as a company.
5. Please state whether the applicant, his partner, director or principal officer is involved in any litigation connected with the securities market which has an adverse bearing on the business of the applicant; or has at any time been convicted for any moral turpitude or at any time has been found guilty of any economic offence. In case the applicant is a trust, the above information should be provided for the members of the Board of Trustees or of the above mentioned persons connected with the Trustee Company.
If yes, the details thereof.
6. Please also state whether there has been any instance of violation or non-adherence to the securities laws, code of ethics/conduct, code of business rules, for which the applicant, or its parent or holding company or affiliate may have been subject to economic, or criminal, liability, or suspended from carrying out its operations, or the registration revoked temporarily.
7. Details of asset management company, if any. (enclose copy of agreement with the asset management company).
8. Declaration statement (to be given as below).
We hereby agree and declare that the information supplied in the application, including the attachment sheets, is complete and true.
AND we further agree that, we shall notify the Securities and Exchange Board of India immediately any change in the information provided in the application.
We further agree that we shall comply with, and be bound by the Securities and Exchange Board of India Act, 1992, and the Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996, and Government of India guidelines / instructions as may be announced by the Securities and Exchange Board of India from time to time.
We further agree that as a condition of registration, we shall abide by such operational instructions/directives as may be issued by the Securities and Exchange Board of India from time to time.
For and
on behalf of................................... (Name of the applicant)
Authorised signatory .................. ................ (Name) (Signature)
Date:
Place:
FORM B
see regulation 7(3)
SECURITIES AND EXCHANGE BOARD OF
INDIA (VENTURE CAPITAL FUNDS) REGULATIONS, 1996.
CERTIFICATE OF REGISTRATION AS VENTURE CAPITAL FUND
I. In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992, (15 of 1992) read with the regulations made thereunder, the Board hereby grants a certificate of registration to ---------------------------------------------------------------------------------------
as a venture capital fund subject to the conditions specified in the Act and in the regulations made thereunder.
II. The Registration Number of the venture capital fund is IN/VC/ /
Date:
Place: MUMBAI
By order
Sd/-
For and on behalf of
SECURITIES AND EXCHANGE BOARD OF INDIA
THIRD
SCHEDULE
SECURIITES AND EXCHANGE BOARD OF INDIA (VENTURE CAPITAL FUNDS) REGULATIONS, 1996
[See reg. 2(3)]
Negative List
58 Third Schedule inserted by SEBI
(Venture Capital Funds) (Amendment) Regulations, 2000 published in the Gazette
of India dated September 15, 2000, vide S.O. No.831(E).